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Gravity model analysis, what drives bilateral trade and where is untapped potential?
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Partners trading more (or less) than the gravity model predicts, positive residuals indicate unexpectedly strong trade ties
Top 2,000 bilateral flows; log scales reveal the gravity relationship
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Source: BACI International Trade Database (CEPII), HS92, 1995–2024 | GeoDist (CEPII) for bilateral distance and colonial ties
Methodology: Gravity model of trade following Anderson & van Wincoop (2003). Estimated via OLS on log-linearized trade flows (Tinbergen, 1962).